LOGISTICS AND SUPPLY CHAIN MANGEMENT
TRANSPORTATION MODES AND SELECTION
Logistics is: The process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements. Logistics is necessary to: Move goods from suppliers to buyers Move finished goods to the customer Products have little value to the customer until they are moved to the customers point of consumption Time utility- products are delivered at the right time. Place utility- products are delivered to the desired location.
Transportation
Means of conveyance or travel (of goods and services) from one place to another
Legal Forms of Transportation
Transportation service companies are classified legally as either common, contract, exempt, or private carriers. Common carriers- offer transportation services to all shippers at published rates between designated locations without discrimination. Contract carriers- not bound to serve the general public. Contract carriers serve specific customers under contractual agreements.
Exempt carriers- exempt from regulation of services & rates & if they transport certain exempt products like produce, livestock, coal, or newspapers. Private carrier- not subject to economic regulation & typically transports goods for the company owning the carrier.
MODES OF TRANSPORTATION
Motor Air Rail Water Pipeline Intermodal
Motor (Trucking)
ADVANTAGES: 1970s economic deregulation of interstate traffic Lower costs Accessibility Small, frequent shipments DISADVANTAGES Speed Capacity Range
Air
ADVANTAGES Premium transportation Speed delivery Range DISADVANTAGES Price Non-direct points Add-on charges
Rail
ADVANTAGES Lowest overall cost per unit weight Consistent time schedule Recommended with most commodity types Weather
DISADVANTAGES Inflexibility Potential damage of goods Ineffective with small shipments
Water (Ships)
Large volumes Long distances Slower than air travel Limited access
Pipeline
Transport of homogeneous materials Lower transportation costs than other modes Higher initial costs Unable to transport a variety of materials
Intermodal
Use of various transportation modes Containers More popular due to globalization
Third-Party Logistics Services- intermediaries facilitate use of the transportation alternatives. Freight forwarders- consolidate shipments to fill trucks or rail cars. Transportation brokers- handle transportation requirements of shippers. legally authorized to act as agents on shippers behalf. Shippers Associations- non-profit orgs that move members cargo. Consolidate members shipments to get volume discounts. Intermodal marketing companies (IMCs) act as intermediarie s between intermodal rail carriers & shippers. Integrated logistics service providers provide services for a fee.
Pricing
Handling characteristics Distance freight is moved Weight of freight Costs inversely related to speed of service
Cost-of-service pricing- vary based on fixed & variable costs. As volume increases, the fixed costs portion goes down. Value-of-Service Pricing- services priced at market bearing competitive levels. A profit maximizing pricing approach. Terms of Sale- price includes transportation FOB destination free on board to the shipments destination. Pricing Negotiation- Since the deregulation, negotiating prices is more common.
Rate Categories- rates can be classified a number of different ways. Classified as class rates, exception rates, commodity rates, & miscellaneous rates.
United Parcel Service
Small package shipper Business built around transportation Effective intermodal transportation
UPS - Methods
Trucks Small, frequent shipments Deliver directly to homes and businesses Air Time sensitive shipments Small packages (long distances)
Rail Transcontinental distances Used primarily in intermodal transport Sea Door to door ocean shipping Weekly departures between major ports
Conclusion
Each mode of transportation has its own strengths and weaknesses The effectiveness of each mode depends on several factors including distance, price, and timeliness Services exist to help choose the best modes of transportation
